Pre Registration Contracts

The common law view of pre-registration contracts was that the company did not exist for legal purposes until it had been formally incorporated (registered). This common law view resulted in company's being unable to enter a binding contract until they had been registered.

However "given the delays which can be encountered in the registration process, the promoter of a company may wish to enter into contracts `for' the company prior to its incorporation" . An example of this may be a promoter wanting to ensure a company will have stock on hand so it will be ready to operate when its registered. He might order stock and sign the contract in the unregistered company's name. Since a company did not exist before registration it could not sign a contract itself or appoint an agent to sign on its behalf. Therefore promoters could not be seen as the company's agent. Circumstances such as this are problematic and raise difficult questions as to the enforceability of the contract and the availability of damages for its breech.

At common law, a company was also incapable of ratifying a pre-registration contract after it was registered. "This was because under the law of agency , ratification has a retrospective effect and the contract was regarded as being made at the time it was entered into by the agent when the company was not in existence" . A company could only be held liable for a pre-registration contract if it entered into a new contract with the same terms as the pre-registration contract after it was registered. This is called novation'.

Seeing as though a company would not be held liable on a pre-registered contract, the courts recognised that innocent third parties could be prejudiced. Accordingly "the courts were prepared on occasions to infer an intension by the promoter to assume personal liability on the contract"

An important case is Kelner v Baxter (1866) where the promoters who had signed the contract on behalf of an unformed company were held to be personally liable. In this particular case the promoters of an unformed company agreed to purchase stock and signed an agreement, which stated on behalf of the Gravesend Royal Hotel Alexandra Hotel Company Limited'. A difficultly had arisen as since the company had not yet been formed the promoters who signed the agreement could not be seen as agents of the company. The court found the promoters to be personally liable. This case shows that a promoter who is aware when negotiating the contract that the company does not yet exists, faces a strong presumption' that the promoter intended to take personal liability, and will need to produce strong evidence to rebut this presumption.

One of the leading cases on the common law position of pre-registration contracts is the decision of the High Court in Black v Smallwood. The High Court rejected the argument that kelner v Baxter created a rule of law that whenever a person contracted for an unformed company, they must be assumed to have attended personal liability' . The outcome shows us that although promoters were sometimes held personally liable for pre-registered contracts (kelner presumption) that there are instances in which promoters were found not to have intended to undertake personal liability on a contract for an unregistered company. An example of this would be the promoter believing that he was acting for a company that was already registered.

The common law view also created problems for promoters. If a promoter used his personal money or performed services on an unregistered company's behalf, the promoter can not require the company when it was later registered to reimburse the expenses. The directors could decide to reimburse the money if they chose to do so but the promoter had no common law remedy if they refused.

To overcome the difficulties with the common law position on pre-registration contracts and to introduce a greater fairness and certainty into this area ss131-133 of the...

...﻿Introduction:
The question of whether contract law can absorb technological change without the need for distinctive guidelines, presuppositions or similar rules is highly dependent on the effects of the amendments to the Electronic Transactions Act 2000 (NSW) (“ETA”). The impact of the ETA on traditional common law principles varies depending on the level of certainty and predictability available in the circumstances and how the law applies. The suitable amount of consistency is likely to vary for the purposes of different legal requirements, depending on the contract formation and how the technology responds to the certain demands of the contracting parties. At a theoretical level, what is required to attain additional certainty in the continuously emerging online domain is a system that identifies and acknowledges all contract presuppositions in order for the ETA to respond entirely and absorb technological change in regards to traditional common law principles. Therefore, it is arguable that Eliza Mik’s statement about the impact of the ETA on traditional common law principles of contract law are suitable to a certain extent as through the analysis of the law, it becomes evident that not all avenues of change in regards to technology can be adapted to without the need for special rules, presumptions or parallel regimes. However, the construction of the common law principles of contract law are...

...Pre-Incorporation Contract Problem
A creative use of the common law provides a number of ways of avoiding the common law pre-incorporation contract problem discussed above.
1. Promoter as Trustee of a Chose in Action:
The promoter could be treated as a trustee of a chose in action for the corporation. This would put the promoter under a fiduciary obligation to enforce the contract and would allow an order permitting the company to sue in the name of the promoter as trustee.
2. Company as Assignee:
The circumstances may allow the court to treat the contract as having been assigned to the company (as opposed to ratification by the company).
3. Restitutionary Principles:
The court might accept that although there was no valid contract with the corporation there was a “quasi contract” allowing for a restitutionary based remedy. This could allow a court to redress an enrichment of one party by the performance of another in the belief that there was a valid contract.
4. Infer a Second Contract from a Course of Dealings:
The court might look at par performance of the terms of the original attempted contract and infer another contract between the third party and the corporation.
5. Offer to Promoter as Agent for the Third Party to Make an Offer to the Company:
The promoter might be viewed as...

...﻿4.2
Pre-contract Stage
Contractor’s Tendering Procedure
• Agreement to tender
• Decision to tender
• Examination of tender documents
• Estimating process timetable
• Enquires of quotations
• Method statement and tender programme
• Site visit
• Outstanding information resolved with consultants
• Pricing process
• Adjudication
• Submission of tender
*In pricing process:
• All-in-rates for trade items or BQ
• Domestic sub-contractors and suppliers
• Nominated sub-contractors and suppliers
(prime cost and provisional sums)
• Preliminaries and conditions of contract
• Daywork charges
• Allowance for firm-price tender
• Project overheads
• Profit and risk
Tender Stage
At tendering stage for the main contract, a contractor has to be deciding which parts of the work to be taken up by sub-contractors. Since tendering for the sub-contractors are to be carried out simultaneously with the tendering of the main contract. The potential sub-contractors and suppliers’ prices may be included when pricing the main contract’s tender. Usually the tendering process for sub-contractors will be less formal, normally be selective tendering or informal negotiations. Sometime the Main contract’s estimator may just simply call up a few better acquainted sub-contractors to get quotations. It is important that quotations or priced sections of the BQ being submitted by the sub-contractor within...

...Liability of Promoters During Pre-incorporation contracts
Table of Contents
Introduction 3
Research Methodology 6
Research Questions 7
Chapter 1: Promoters and Pre-incorporation Contracts 8
Chapter 2: Fiduciary duty of the promoter 11
Chapter 3: Breach of the pre-incorporation contract and the Liability of Promoters 13
Conclusion 19
Bibliography 20
Introduction
A company is an entity which is recognized and created by the law. It can only contract when the law deems it to come into existence. This is the time when the company receives whatever powers the law and its constitution accords to it.
Until a company is registered it has no existence of any kind. Many a times, promoters wish to enter into contracts which are intended to be for the benefit of the company. To get the things going in a normal way, when the public is asked to subscribe for shares immediately after the company is formed, it is necessary that the contracts are entered into for the public to know that the Company is more than the empty shell.
A company cannot be held liable on a pre-incorporation contract and that the promoters were personally liable on a contract made before the incorporation of the company. There is no reasoning within the realm of agency and jurisprudence, which can justify this decision. Two...

...CONTRACTSCONTRACT
 a meeting of minds between 2 persons whereby one binds himself, with respect to the other, to give something or to render some service (ARTICLE 1305)
GENERAL PROVISIONS
(Arts. 1305-1317)
Distinguish an ordinary Contract:
a.) from a Contract of marriage
b.) from an obligation
c.) from an imperfect promise
d.) from a pact
e.) from a stipulation
a.) from a Contract of marriage
ORDINARY CONTRACT
1. The parties may be 2 or more persons of same or different genders
2. Nature, consequences and incidents are governed by agreement of the parties
3. Once Contract is executed, result is a Contract
4. Can be terminated or dissolved by mere agreement of parties
5. In case of breach, injured party will institute an action for damages
CONTRACT OF MARRIAGE
1. It is necessary that parties must be 1 man and 1 woman
2. Nature, consequences and incidents are governed by law
3. Once marriage is celebrated, result is a status
4. Cannot be terminated or dissolved
5. In case of breach, injured party will institute Civil Action (for legal separation) or Criminal Action (for adultery or concubinage)
b. from an obligation
CONTRACT OBLIGATION
 the cause  the effect
However, among 5 Sources of Obligations (1.Law, 2.Contracts, 3.Quasi-contracts, 4.Acts punished by law,...

...surrounding the pre-incorporation contracts and evaluate how fare these problems have been resolved by the provisions of section 36C of the Companies Act 1985, as amended by the Companies Act 2006.
1) what are pre-incorporation contracts
2) problems surrounding pre-incorporation contracts
3) how fare have these problems been resolved
A company cannot enter into a contract before it exists as a legal person by being incorporated on its
registration by the Registrar of Companies after the steps required by the Companies Act 1985 have
been carried out.1 Likewise, a company cannot exercise any of its powers or functions, such as
appointing agents or representatives to negotiate and conclude contracts in its name or on its behalf,
before it has been incorporated by registration under Companies Act 1985.2
A contract which purports to be made on a company's behalf before it is incorporated takes effect as
a contract between the persons who purport to act on behalf of the future company and the other
contracting parties.5 Consequently, the persons who purport to contract on the company's behalf are
liable personally for fulfilment of the contract and they may correspondingly enforce the contract
against the other contracting parties, subject to...